South East Water has revealed it paid out £2.3 million in dividends to investors despite widened losses and a £3 million cost hit from summer heatwaves and supply interruptions.

Details of the payout came as the supplier – which is under investigation by regulator Ofwat over its service to customers and record in maintaining a water supply – reported pre-tax losses of £18.1 million for the six months to September 30, against losses of £12.7 million a year earlier.

It comes just days after troubled rival Thames Water announced a £37.5 million dividend to its parent company – with the payout being probed by Ofwat over concerns it may have broken rules designed to protect customers and the environment.

South East Water insisted its dividend was down on the £4.5 million paid out a year earlier and was “lower than Ofwat’s view of what is a reasonable nominal dividend yield”.

But it comes after a dire summer for South East Water, which is currently the worst performer for water supply interruptions in England and Wales, according to Ofwat.

It revealed in half-year results that costs surged over the half-year, pushed higher by a bill for a summer of water interruptions, with £3 million forked out – including £1.5 million in compensation and £700,000 for providing bottled water to households and customers.

Its report also showed it faced a surging bill for servicing its £1.4 billion debt pile – with these costs up £7.4 million to £54.8 million in the half-year due to inflation and higher interest rates.

South East Water imposed a hosepipe ban earlier this year, blaming exceptionally hot weather and more people working from home for ramping up demand and “testing” its infrastructure.

Ofwat launched a probe into the firm in November, saying that “too many customers have been failed too often” by the supplier.

South East Water serves about 2.2 million households and businesses in Surrey, Kent, Sussex, Hampshire and Berkshire.

Ofwat and the Government must put an end to the water sector’s out of control payout culture

The group’s bosses said on announcing its results: “Unprecedented extreme weather events were the cause of the majority of supply interruptions, but we appreciate that problems experienced by our customers will result in lower levels of customer satisfaction.

“We are deeply sorry to customers who have been affected by supply interruptions and continue to work tirelessly to recover.

“We have 52 teams actively repairing leaks, and 40 technicians proactively looking for them.”

The GMB trade union criticised South East Water over its dividend payout.

Gary Carter, GMB national officer, said: “Ofwat and the Government must put an end to the water sector’s out-of-control payout culture.

“This money needs to be spent investing in infrastructure to reduce sewage spills and clean up the country’s rivers, before shareholders get their piece of the pie.

“For too long money has been flowing out and debts have been piling up. It must stop.”